It started out as a way for people to exchange electronic cash quickly and anonymously. Eight years on, experts hope that blockchain technology will revolutionize payments in Canada, and create a healthy tech economy in the process.

Most people familiar with it will have first run across blockchain technology in the form of bitcoin, the electronic currency first launched in early 2009. The first bitcoin transactions were worth next to nothing in dollar terms, but the currency has grown since then. Today, the network is processing 350,000 confirmed transactions per day, worth about US$646 million.

No wonder some think the blockchain could fuel the next payments revolution. Canadian author and business specialist Don Tapscott is so inspired by it that he started the Blockchain Research Institute, a thinktank that will focus on collaborative innovation for blockchain use cases. Financial services features among its eight research areas.

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“We need to reinvent the entire payment system around blockchain. An Interac 2.0, if you like,” says Tapscott, who keynoted at the Payments Canada Summit in Toronto last month.

Canada has some fine electronic payments systems, such as Interac e-Transfer, that can take from minutes to hours to reach recipients via email. That’s great, but instant is better, says Tapscott, adding that cross-border payments can take far longer to execute.

In these cases, payments go through a central body such as a bank or the Interac system. In a blockchain, participants needn’t wait for a central party to adjust payments on its own ledger.

Instead, each participant in the payments network keeps a copy of the ledger themselves, in what is known as a distributed ledger system. When someone makes a payment, they tell the entire network, which updates all copies of the ledger at once, ‘sealing’ the new transactions into the ledger using software code so that no one can tamper with it. This makes everything move at Internet speed rather than bank speed, and also keeps everyone honest, because all participants have access to the same data.

We need to reinvent the entire payment system around blockchain. An Interac 2.0, if you like.

“For small businesses, it would speed up the metabolism of their operations,” says Tapscott. “There’d be no three-day settlement for basic transactions, because payment and settlement on the blockchain is instant.”

The problem with bitcoin is that the average Joe or Jane is still confused about how to use it, according to experts. Kyle Kemper, executive director of the Blockchain Association of Canada, agrees that the blockchain-based payment system needs work to make it more digestible.

“Bitcoin in its current form isn’t highly usable,” he says. “It’s not difficult to set up but there’s a learning curve.”

That’s enough to throw a wrench in the works for many small businesses, who may have heard only of the currency’s travails, such as failed exchanges and hacked accounts.

They may also be alarmed by its extreme volatility. The currency has been known to drop by a fifth in value in a single day. While it may make short-term speculators happy, this kind of movement isn’t ideal for a payment currency.

Tapscott is also skeptical of bitcoin’s future. He worries about divisions within the community of software developers that program the bitcoin network. This has already resulted in a different version of bitcoin known as Bitcoin Classic.

“It points to the need for a more sophisticated approach to stewardship of these resources, along the lines of what the first version of the Internet has,” he says.

Both Kemper and Tapscott agree on one point: the future promises not just the bitcoin blockchain, but a veritable forest of different chains, each with its own capabilities. One of the most promising is Ethereum, a new blockchain that can manage more than just electronic money.

Developed by University of Waterloo dropout Vitalik Buterin, this system can run its own programs, known as smart contracts, enabling participants to conduct all kinds of transactions with each other.

J.P. Moczulski for National Post

Canada has an ongoing connection with blockchain technology and its advocates, which Tapscott believes could turn it into an innovation hub for the technology. In a recent report written with his son and BRI co-founder Alex Tapscott, he calls for the development of a blockchain centre of excellence in Toronto.

The report cites several blockchain efforts that Tapscott says have a base or at least connections north of the border, including Nuco, which is development a blockchain-based platform for digital business applications.

“The first era of the Internet was based in Silicon Valley, but the second era will not be based there for a bunch of reasons. It will be based somewhere else, and the likely candidate is the Toronto corridor,” says Tapscott. “This could be the key to building an innovation economy in Canada.”

Blockchain could have a stake in the future of payments technology here in Canada, but bitcoin’s blockchain isn’t the only show in town. As more companies strike out with variations on the blockchain theme, a nascent, active market looks set to produce more innovations over time. Tapscott hopes that Canada will play a central part in that process – and if it enables small businesses to get their money from one place to another more quickly and effectively, so much the better.